Strata shock! Why your levies are way too high

“Why are my levies so high?’ It’s one of the most common cries in strata. “Where does all the money go? Strata managers are being paid a fortune and we are being ripped off!”

There’s nothing new in complaints about levies payments being unfair, unjustified or excessive. But in these days of cost-of-living stress, the complaints are louder and probably more justified.

So what do you do if you think your levies are higher than they should be?  And whose fault is it? And are you blaming the wrong people, such as the obvious targets like strata managers and your committee?

What are levies anyway?

Your levies are payments you make through your strata manager to pay into two funds – one for the running of your building and the other for its current and future maintenance.

Your share of these payments is based on the unit entitlements (UEs) of your property which are very roughly related to its market value.  Very roughly, but it’s the best indicator you have.

That means the owners of a ground-floor studio flat should pay a lot less than the owner of a three-bed penthouse.  Now, why do your levies seem to be too high?

First of all you have to look at all the facilities in your block – you know, the things like the swimming pool that were in the shiny brochure.  Also if you a have a lot of lifts for relatively few residents, that will push levies up too.

And we can back off the strata managers, to begin with at least.  They actually don’t get that much – between $300 and $350, on average, per apartment per year.

And then there is strata insurance, which is compulsory for all schemes and can be very expensive.

And that brings us to why your levies might be higher than they should be – and what you can do about it.

Underquoting and waste

If you are in a relatively new apartment block, your developer may have underquoted the probable levies needed to run the building, to make the apartments easier to sell.

And if that sounds like a developer-bashing conspiracy theory, ask yourself why the government has recently passed new laws to prevent it and to heavily fine miscreants who do it.

Your strata committee (with your implied approval) may be wasting money on anything from legal action over minor by-law breaches to overpriced cosmetic changes to common areas. 

Also, they may not be taking measures to save money on lighting and water bills which can mount up very rapidly.  It’s all your money that’s being wasted.

Neglected repairs

In older buildings, you may be paying for repairs because sinking funds were neglected by previous owners.  Your building doesn’t have any choice – the law says the owners must repair and maintain common property.

Your committee may be paying too much for services, from cleaners to building managers, often through long-term feather-bedded contracts, sometimes with kickbacks to strata managers and committee members. These contracts have to be scrutinised and, again, the government is bringing in laws to stop these abuses.

Contract cons and kickbacks

You may also, through inflated maintenance fees, be paying bills that the developer should have paid for infrastructure.

Stormwater drains are the classics – the developer gets them installed for free provided they can persuade the owners who bought apartments from them not to look too closely at the maintenance contract. 

I found one recently where the contract allowed the drain people to increase the fee by 10 per cent per year for 15 years. I mean, who gets a 15-year contract anyway?

Your strata manager may be taking a 20-25 per cent commission on your insurance premiums.  Some don’t but many do and, while they are legally obliged to notify owners that they are getting commission, few might even nudge strata schemes towards the policy that gives them more bang for your bucks, sometimes with inferior coverage.

Your strata manager may be taking a 20-25 per cent commission on your insurance premiums.  Some don’t but many do and few will even nudge strata schemes towards the policy that gives them more bang for your bucks, sometimes with inferior coverage.

And while we are on the subject of strata managers, they may (with your approval) be charging you what they call Schedule B fees. Depending on what it says in your scheme’s contract, these could be a set fee for every phone call they make or answer, email they write or read or meeting they attend.

If they are particularly pernickety and your strata scheme is highly problematic, those fees which seem reasonable in theory can go through the roof.

What you can do about it?

As I’ve said throughout, all of this is done with your (and other owners’) approval. Many apartment owners are under the mistaken impression that the strata manager tells the strata committee what to do and the committee tells the owners. 

It’s the other way round (or should be). The owners tell the strata committee what they want at their AGM and elect the committee members who will make that happen. The committee can make its own decisions but they can be overruled by the owners voting at a general meeting.

The AGM is where you get your chance to go through every cent that’s being spent. A budget must be presented at the AGM and approved by a majority of owners voting, either in person or by proxy.

If you can scrutinise the budgets, cut any waste and get a majority of owners to demand that better contracts be negotiated, then you can reduce your levies or at least prevent them from rising too quickly.

In short, your levies are a reflection of what your building spends on admin, repairs and maintenance. They are only really “too high” if your scheme is spending more than it needs to, rather than what you expected to pay or what you can afford.

And no, there is no agency that will look at your levies and start ringing alarm bells and asking questions.  You’ll have to do all the digging and heavy lifting yourselves – and I use the plural because you’ll need the support of other owners.

But with that support – and they will also be paying more than they want to – you might be able to get your levies back to closer to where you expected them to be.